ADP report sends US markets lower

FTSE underperforms

Ex-dividend stocks and Tesco have been the primary culprits of the FTSE’s underperformance versus its peers today, but so long as 6800 holds the bias remains to the upside. However, until we see 6900 and then move beyond it, it would be too early to suggest a continuation of the rally.

M&A activity once again lifted Smith & Nephew, and it is pleasant to realise that there are still some things moving in the market and that not everything has shifted into neutral ahead of the ECB meeting.

Tesco has seen the fall in its share price intensify this afternoon, putting the supermarket giant on a collision course with the 280p level that marked the lows in April.

US markets mixed

ADP job numbers were weaker than expected, causing US markets to start the session in the red, while revisions to the previous month also darkened the mood. However, the S&P 500 managed to claw its way higher while the NASDAQ once again proved to be the outperformer, albeit by the smallest of leads. Even if there is a desire to build on the late May gains, the ECB meeting and non-farm payrolls this week provide a convincing rationale as to why most traders will prefer to sit back and await developments next week.

Crude prices surge

For oil traders, it seems that expectations of a return to some degree of normality in Libya were premature, but it was a drop in US inventories that drove a resurgence in crude prices. Both NYMEX and Brent bounced convincingly from yesterday’s lows, but this is a market that remains vulnerable to signs of a supply lift from previously constricted sources.

Renewed allegations of shady dealing in Chinese copper saw the price push to its lowest level in over two weeks, adding to the view that the recent bounce towards $3.20 was just the latest in the current downtrend.

Uneventful session for EUR/USD

The long shadow of the June ECB meeting has fallen over EUR/USD this week, with today’s trading being even less eventful than yesterday. The market consensus that Mario Draghi will cut rates has morphed into almost religious conviction, but he needs to go all out if EUR/USD is to sustain its downward momentum. As a Roman, Mario Draghi will be keenly aware that he crossed a Rubicon when he signalled action back in May, and that his task is to buy time for the euro while governments work to repair the economic damage wrought by years of crisis.

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